The ubiquitin-like modifier FAT10 is upregulated under pro-inflammatory conditions, targets its substrates for proteasomal degradation and functions as a negative regulator of the type-I IFN response. Influenza A virus infection upregulates the production of type-I IFN and the expression of the E3 ligase TRIM21, which regulates type-I IFN production in a positive feedback manner. In this study, we show that FAT10 becomes covalently conjugated to TRIM21 and that this targets TRIM21 for proteasomal degradation. We further show that the coiled-coil and PRYSPRY domains of TRIM21 and the C-terminal diglycine motif of FAT10 are important for the TRIM21-FAT10 interaction. Moreover, upon influenza A virus infection and in the presence of FAT10 the total ubiquitination of TRIM21 is reduced and our data reveal that the FAT10-mediated degradation of TRIM21 diminishes IFNβ production. Overall, this study provides strong evidence that FAT10 down-regulates the antiviral type-I IFN production by modulating additional molecules of the RIG-I signaling pathway besides the already published OTUB1. In addition, we elucidate a novel mechanism of FAT10-mediated proteasomal degradation of TRIM21 that regulates its stability.